II. Distributes targeted aid grants based on
a formula which calculates a school district’s education operating need, fiscal
capacity, and state average operating cost per weighted pupil, as adjusted by
the consumer price index.

III. Provides transition education grants for
fiscal years 2006-2010 to school districts based on a formula which compares the
grant amount in the current fiscal year to the grant amount received in the
preceding fiscal year.

Matter removed from current law
appears [in brackets and struckthrough.]

Matter which is either (a) all new or
(b) repealed and reenacted appears in regular type.

05-0702

04/09

STATE OF NEW
HAMPSHIRE

In the Year of Our Lord Two
Thousand Five

AN ACT relative to education funding and the
distribution of targeted aid and transition education grants.

Be it Enacted by the Senate
and House of Representatives in General Court convened:

1 Findings and Purpose.

I. The general court finds that the present
system of providing adequate education grants to support public elementary and
secondary education does not sufficiently serve the objective of equalizing
educational opportunity in the state, does not efficiently direct state
resources to school districts based on local education need and financial
resources, and requires levy and collection of a statewide property tax that is
divisive and unnecessary.

II. The purpose of this act is to cherish
education and equalize educational opportunity by enabling every community to
provide a constitutionally adequate education. In pursuit of such purpose, this
act allocates state school aid through a distribution formula that compares each
community’s available fiscal capacity to its education need, measured by the
number of its pupils adjusted for the higher cost of educating certain pupils,
and the state average operating cost per pupil, and provides aid to communities
which cannot meet such need from local resources.

III. The state average operating cost per
pupil, as determined in this act, is found to be an appropriate proxy for the
per pupil cost of a constitutionally adequate education.

2 Definitions. RSA 198:38 is repealed and
reenacted to read as follows:

198:38 Definitions. In this subdivision:

I. “Municipality” means a city, town, or
unincorporated place.

II. “School district” means school district
as defined in RSA 194:1 or RSA 195:1.

III. “Elementary school” means a school with
any of the grades kindergarten through 8.

VII. “Average daily membership in residence”
and “resident pupils” mean the average daily membership in residence as defined
in RSA 189:1-d, IV except that no kindergarten pupil shall count as more than
1/2 day attendance per calendar day.

I. The state treasurer shall establish an
education trust fund in the treasury. Moneys in such fund shall not be used for
any purpose other than to distribute [adequate education] grants to
municipalities’ school districts pursuant to RSA 198:42[, and to provide low
and moderate income homeowners property tax relief under RSA 198:56-198:61].
The state treasurer shall deposit into this fund immediately upon
receipt:

I. For the biennium beginning July 1, 2005,
and every biennium thereafter, except for municipalities where all school
districts therein provide education to all of their pupils by paying tuition to
other institutions, the department shall determine the amount of the targeted
aid grant for a municipality as follows:

(a) A municipality’s targeted aid grant shall
be its education operating need less its fiscal capacity, as determined in
accordance with this paragraph.

(b) For the purpose of determining education
operating need:

(1) “State average operating cost per pupil”
means the amount calculated as such by the department. For the biennium
beginning July 1, 2005, the amount shall be $7,809, based on the department’s
calculation for the 2002-03 fiscal years.

(2) “State average operating cost per
weighted pupil” means the amount produced by multiplying state average operating
cost per pupil by the statewide total average daily membership in residence and
dividing the product by the statewide total number of weighted pupils, as
defined in this section. For the biennium beginning July 1, 2005, the amount
shall be $5,816.

(3) A municipality’s total weighted pupils
means the number of its elementary school pupils, including kindergarten pupils,
plus 1.1 times the number of its high school pupils, plus the number of its
educationally disabled children, plus the number of its pupils eligible to
receive free or reduced price lunch, plus the number of its pupils with limited
proficiency in the English language. In calculating and reporting its total
weighted pupils, a municipality shall base the number on its average daily
membership in residence, but shall not count any individual student in more than
one of the categories of educationally disabled, free or reduced lunch, or
limited English proficiency.

(4) A municipality’s education operating need
shall be the state average operating cost per weighted pupil multiplied by the
municipality’s total weighted pupils.

(c) For the purpose of determining a
municipality’s fiscal capacity:

(1) “Total household income” means the
municipality’s median household income multiplied by the number of its
households, as determined by the 2000 United States census;

(2) “Equalized property valuation” means the
amount determined as such by the department of revenue administration as of
April 1, 2003, excluding property subject to taxation under RSA 83-F.

(3) A municipality’s fiscal capacity shall be
the sum of its equalized property valuation plus 4.5 times the municipality’s
total household income, divided by 2. The result shall then be multiplied by
0.0089.

(d) For the biennium beginning July 1, 2005,
the calculation required under this paragraph shall be performed and distributed
to school districts as soon as practicable, but no later than August 1, 2005.
For subsequent bienniums, the calculation shall be performed and distributed not
later than October 1 in the calendar year preceding the beginning of the
biennium for which it is made.

II.(a) For the biennium beginning July 1,
2007, and for every biennium thereafter, the department shall perform the
calculations required under this section based on the most recent available data
representing the number of elementary and high school pupils, educationally
disabled children, pupils eligible for free or reduced price lunch, pupils with
limited proficiency in the English language in each municipality, and the
equalized property valuation, excluding property subject to taxation under RSA
83-F.

(b) For the biennium beginning July 1, 2007,
and every biennium thereafter, the amount of the state average operating cost
per weighted pupil in the calculation of education operating need shall be
increased according to the change in the northeast consumer price index, as
calculated by the United States Department of Labor. Furthermore, the department
shall recalculate a municipality’s population, median household income, and
number of households by reference to the most recently available data from the
United States decennial census or such current official estimates of such data
from the department of revenue administration as may be available prior to the
next United States decennial census. In addition, the department shall adjust
the factor of 0.0089 in the calculation of fiscal capacity so that the total
amount of grants provided under this section increases by the percentage
increase in the northeast consumer price index plus the percentage increase in
total state public elementary and secondary pupils since the calculation for the
last preceding biennium.

III. For municipalities where all school
districts therein provide education to all of their pupils by paying tuition to
other institutions, the amount of the targeted aid grant for each municipality
shall be the lesser of the following:

(a) The amount calculated in accordance with
paragraph I or paragraph II of this section, as applicable; or

(b) The total amount paid for education
expense as determined by the department.

198:41-b Transition Education Grants.

I. Notwithstanding the provisions of RSA
198:41-a, for the fiscal years 2006 through 2010, each municipality shall
receive a transition education grant determined as follows:

(a) For fiscal year 2006, if a municipality’s
targeted aid grant calculated under RSA 198:41-a is greater than the
adequate education grant it received for fiscal year 2005, the municipality
shall be entitled to receive an amount equal to the amount of its adequate
education grant plus 10 percent of the difference, if any, between the
amount of the municipality’s targeted aid grant for fiscal year 2006 and its
adequate education grant for fiscal year 2005. However, if a municipality’s
fiscal year 2006 targeted aid grant is less than its fiscal year 2005 adequate
education grant, the municipality shall be entitled to receive 95 percent of
such adequate education grant.

(b) For fiscal year 2007, if a municipality’s
targeted aid grant calculated under RSA 198:41-a is greater than the
adequate education grant it received for fiscal year 2005, the municipality
shall be entitled to receive an amount equal to such adequate education grant,
plus 20 percent of the difference, if any, between the amount of the fiscal year
2007 targeted aid grant and the fiscal year 2005 adequate education grant.
However, if the municipality’s fiscal year 2007 targeted aid grant is less than
the fiscal year 2005 adequate education grant, the municipality shall be
entitled to receive 91 percent of such adequate education grant.

(c) For fiscal year 2008, a municipality
shall be entitled to receive a transition education grant in an amount equal to
the amount it was entitled to receive for fiscal year 2007 under this paragraph,
plus 25 percent of the difference, if any, between the amount of the targeted
aid grant it would be entitled to receive in fiscal year 2008 under RSA 198:41-a
and the amount of the transition education grant it was entitled to receive in
fiscal year 2007.

(d) For fiscal year 2009, a municipality
shall be entitled to receive a transition education grant in an amount equal to
the amount it was entitled to receive for fiscal year 2008 under this paragraph,
plus 40 percent of the difference, if any, between the amount of the targeted
aid grant it would be entitled to receive in fiscal year 2009 under RSA 198:41-a
and the amount of the transition education grant it was entitled to receive in
fiscal year 2008.

(e) For fiscal year 2010, a municipality
shall be entitled to receive a transition education grant in an amount equal to
the amount it was entitled to receive for fiscal year 2009 under this paragraph,
plus 50 percent of the difference, if any, between the amount of the targeted
aid grant it would be entitled to receive in fiscal year 2010 under RSA 198:41-a
and the amount of the transition education grant it was entitled to receive in
fiscal year 2009.

II. Beginning with fiscal year 2011, and
every fiscal year thereafter, a municipality shall be entitled to receive an
amount determined in accordance with RSA 198:41-a.

5 Distribution Schedule and Appropriation.
RSA 198:42 is repealed and reenacted to read as follows:

I. The transition education grant determined
in RSA 198:41-b, and beginning in fiscal year 2011, the targeted aid grant
determined in RSA 198:41-a, shall be distributed to each municipality’s school
district legally responsible for the education of the pupils who attend approved
public schools within the district, or in other districts, or who attend
approved programs for educationally disabled children, as the case may be, from
the education trust fund in 4 payments, 20 percent on August 1, 20 percent on
September 1, 30 percent on January 1, and 30 percent on April 1 of each school
year; provided that for a dependent school district, the grant determined in RSA
198:41-a or RSA 198:41-b shall be distributed to the municipality, which shall
appropriate and transfer the grant funds to its dependent school department.

II. Beginning July 1, 2005, and every fiscal
year thereafter, the amount necessary to fund the grants under RSA 198:41-a and
RSA 198:41-b is hereby appropriated to the department from the education trust
fund created under RSA 198:39. The governor is authorized to draw a warrant from
the education trust fund to satisfy the state’s obligation under this section.
Such warrant for payment shall be issued regardless of the balance of funds
available in the education trust fund. If the balance in the education trust
fund, after the issuance of any such warrant, is less than zero, the amount
shall be drawn from any funds in the treasury not otherwise appropriated and
commissioner of the department of administrative services shall inform the
fiscal committee and the governor and council of such balance. This reporting
shall not in any way prohibit or delay the distribution of such grants.

III. The department shall certify the amount
of each grant to the state treasurer and direct the payment thereof to the
school district. When a payment of a grant is made to a school district, the
municipality on whose behalf the payment is made, shall receive notification
from the state treasurer of the amount of the payment made to its school
district or districts.

6 Maintenance of Local Control. RSA 198:48 is
repealed and reenacted to read as follows:

198:48 Maintenance of Local Control.
Distributions under RSA 198:42 depend only on the provisions of RSA 198:41-a and
RSA 198:41-b, and are independent of how the municipalities decide to spend the
distributions or other funds they may raise for education. Notwithstanding any
other provision of law, nothing in this subdivision is intended in any way to
limit or control how school districts operate or spend their budgets except that
grants distributed under RSA 198:42 must be expended for educational purposes
within 2 years from the date of receipt. Transition education grants and
targeted aid grants shall not be considered unanticipated funds under RSA
198:20-b.

7 Charter and Open Enrollment Schools;
Funding. Amend RSA 194-B:11, I to read as follows:

I. There shall be no tuition charge for any
pupil attending an open enrollment or charter conversion school located in that
pupil’s resident district. Funding limitations in this chapter shall not be
applicable to charter conversion or open enrollment schools located in a pupil’s
resident district. For any other charter or open enrollment school authorized by
the school district, the pupil’s resident district shall pay to such school an
amount equal to not less than 80 percent of that district’s average cost per
pupil as determined by the department of education using the most recent
available data as reported by the district to the department. For any charter
school authorized by the state board of education, the pupil’s resident district
shall pay tuition beginning July 1, 2004 and every fiscal year thereafter, in an
amount per pupil equal to the amount [determined in RSA 198:40, I]
of the grant received by the district under RSA 198:41-a or RSA 198:41-b,
as applicable, divided by the district’s average daily membership in residence.
Tuition amounts shall be prorated on a per diem basis for pupils
attending a school for less than a full school year. To the extent permitted by
law, tuition payments shall coincide with the distribution of adequacy grants
under RSA 198:42 or on such other terms as are mutually acceptable.

(b) Once pupils enrolled in an approved
alternative kindergarten program have been counted in the average daily
membership in residence, school districts shall [receive, for each such
pupil, an adequate education grant calculated in accordance with RSA 198:40
through RSA 198:42] include such pupils in its calculation and report
of weighted pupils under RSA 198:41-a, I(b)(3).

VIII. Notwithstanding the provisions of this
section, alternative kindergarten programs which were approved and in effect
prior to April 29, 1999 may continue to operate and [shall continue to
receive per pupil adequate education grant amounts in accordance with RSA 198:40
through RSA 198:42] its pupils shall be included in the district’s
calculation and report of weighted pupils under RSA 198:41-a,
I(b)(3).

(c) The relevant school district
superintendent has excused a child from attendance because the child is
physically or mentally unable to attend school, or has been temporarily excused
upon the request of the parent for purposes agreed upon by the school
authorities and the parent. Such excused absences shall not be permitted if they
cause a serious adverse effect upon the student’s educational progress. Students
excused for such temporary absences may be claimed as full-time pupils for
purposes of calculating state aid under RSA 186-C:18 and [adequate]
targeted education grants under RSA [198:41]
198:41-a.

II. The commissioner shall issue a warrant
under the commissioner’s hand and official seal for the amount computed in
paragraph I to the selectmen or assessors of each municipality by December 15
directing them to assess such sum and pay it to the municipality for the use of
the school district or districts [and, if there is an excess statewide
enhanced education tax payment due pursuant to RSA 198:46, directing them to
assess the amount of the excess payment and pay it to the department of revenue
administration for deposit in the education trust fund]. Such sums shall be
assessed at such times as may be prescribed for other taxes assessed by such
selectmen or assessors of the municipality.

13 Repeals. The following are repealed:

I. RSA 21-I:18, I(1), relative to the
purchase of services by the department of administrative services for the
administration of low and moderate income homeowners property tax
relief.

I. Paragraph II of section 13 of this act
shall take effect March 31, 2005.

II. The remainder of this act shall take
effect July 1, 2005 at 12:02 a.m.

LBAO

05-0702

Revised 2/8/05

HB 684 FISCAL
NOTE

AN ACT relative to education funding and the
distribution of targeted aid and transition education grants.

FISCAL IMPACT:

The Department of Revenue Administration
indicates this bill will decrease state education trust fund revenue by
$371,302,034 and decrease education trust fund expenditures by $7,400,000 in
FY 2006 and each year thereafter. The Department of Education indicates this
bill will decrease state education trust fund expenditures and local revenue
by $401,719,371 in FY 2006, $405,419,795 in FY 2007, $434,087,691 in FY 2008
and $414,000,593 in FY 2009. There will be no fiscal impact on county
revenue or county and local expenditures.

METHODOLOGY:

The Department of Revenue Administration
states this bill repeals the statewide property tax and the related low and
moderate income homeowners tax relief program. As a result, the statewide
property tax receipts will decrease by $371,302,034, the current amount
collected, and tax relief payments will decrease by an estimated $7,400,000,
the amount paid out in FY 2004.

The Department of Education indicates this
bill will reduce the cost of adequacy as shown below: